Friday, July 15, 2011

Transcaspian Pipeline Feasibility Study Launched

The State Oil Company of Azerbaijan (SOCAR) and KazMunaiGas (KMG), the state-run energy companies of Azerbaijan and Kazakhstan, have agreed to launch a feasibility study for the Trans Caspian Pipeline (TCP), according to the Energy Delta Institute. The two companies have issued a tender offer, and interested parties have until July 14 to submit their proposals, according to Open Central Asia. Vurgun Jafarov, head of the Kazakh office of SOCAR, said the two companies will set up a joint structure, or consider other ways, to handle the study which will completed by the end of 2011.

This is welcome news to the supporters of the Nabucco pipeline, which needs guarantees of feedstock to move forward. Turkmen President Gurbanguly Berdymukhammedov had previously said he would sell as much as 40 billion cubic meters of gas per year to the West, provided the TCP is built. Azerbaijan is willing to provide one third of the gas that is required, but without access to gas from the eastern side of the Caspian, Nabucco does not appear economically viable.

European Energy Commissioner Guenther Oettinger is predicting that the European Union will receive gas from the Caspian within two or three years. Following a January visit to the area, he reported that Azeri President Ilham Aliyev could sell up to 21 bcm of gas within five to eight years. He confirmed that Turkmen President Berdymukhammedov would commit to 10 bcm, and he speculated that Uzbekistan was readh to join, according to the Earth Times. There was no mention of a Kazakh involvement, but such a move makes sense given the huge offshore gas deposits that Kazakhstan controls.

The major impediment to the TCP remains the legal status of the Caspian. Russia and Iran claim they need to assent to a pipeline project that would traverse the sea bed; other countries insist that bilateral agreements between the countries where the pipelines travel are sufficient. In June, Russian Ambassador to Azerbaijan Vladmir Dorokhin claimed that a pipeline would hurt the ecology of the Caspian, according to Eurasianet. "Russia, as a Caspian country, is against the laying of pipelines and gas lines along the bed of this unique body of water, which could harm the ecological state of the Caspian," he said. Russia insists that a treaty governing use of the Caspian outlines the need for consensus on ecological issues; the problem is, the treaty he quoted has never been ratified. Such claims from Russia would be more believable if Russia's own ecological track record was not so dismal.

Kazakhstan and Azerbaijan's willingness to take the lead on this project, against the wishes of Moscow, shows that economics continues to trump political considerations in this vital part of the world.